Case: Hardie Trading Ltd. &amp; Another Vs. Addisons Paint &amp; Chemicals Ltd

2. It is the case of Hardie that it also wanted to commence business in India and to this end took steps to have the words Spartan and Spartan Velox registered in this country as far back as in 1940. The words were entered in the Register of Trade Marks at Calcutta in Hardies name. The registration was valid for what was then undivided India and other South Asian countries.3. On 6th November 1946, a collaboration agreement was entered into between Hardie and the respondent (who will be described as Addisons) for a period of 20 years under which Addisons was to be Hardies Chief agent in India and other named territories for selling surface coatings supplied by Hardie. The agreement also envisaged Addisons being the registered user of the trademarks during the period of the agreement and also the setting up of a factory by Addisons at Madras to manufacture the surface coatings according to Hardies formulae. Addisons undertook that all formulae and technical information which may be supplied to it by Hardie would be treated as strictly confidential.4. Pursuant to the collaboration agreement, between 1946 to 1949, Hardies products were marketed in India through Addisons under Hardies registered trademarks and device. By 1948 Addisons had set up its own factory at Chennai for manufacturing paints and lacquers and other surface coatings with the technicalsupplied by Hardie to Addisons. The products were then sold by Addisons under the trade mark and device of Hardie for which Addisons paid Hardie royalty at agreed rates. Theagreement between Hardie and Addisons was executed on 11th July 1963. Apart from the clauses which ensured Hardies strict supervision over the quality of the surface coatings manufactured by Addisons, the agreementsaid trade marks shall not be used in conjunction with or in close juxtaposition to any other trade mark and shall at all times be so described as clearly to indicate that they are the trade marks of Proprietors and that they are being used by the Users only by way of permitted use".This agreement also contained a clause giving Addisons the option to acquire Hardies rights in the trade marks for a consideration calculated on the basis of the royalties payable for three years as mentioned in the collaboration agreement. The registered user agreement was initially for a period of three years and was operative upto 31st August, 1968.6. In 1967, Hardie had agreed to assign its rights in the trademarks to Addisons for a sum payable in pound sterling. The Reserve Bank of India allegedly refused permission to Addisons to remit the amount. Whatever the reason, it is not in dispute that the consideration was not paid. One of the disputes raised in these appeals relates to the effect of this agreement. To return to the narration of facts. In an anticipation of the assignment the Registered Users agreement was cancelled on 31st August, 1968. However, since the consideration was not paid and the assignment did not come through, Hardie requested Addisons to discontinue to use of Hardies trademarks. Correspondence was exchanged between the parties. Addisons requested for permission to continue to use the trademarks and device. Hardie allowed them to do so till December, 1971. During this period, Addisons continued to use Hardies trademarks and device on the surface coatings produced by it.7. On 3rd November, 1971, Addisons applied for registration of a device which consisted of the frontal view of a standing helmeted warrior holding a shield and spear. On 11th November, 1971 Addisons informed Hardie that with effect from Ist December, 1971, it would discontinue the use of Hardies trade marks and that Addisons had made arrangements to market its products in its own brand name. This was followed by several advertisements by Addisons in newspapers to the effect that Addisons products would no longer be sold under the old trade marks but under theAddisons with the pictorial representation of the standing warrior.8. On 6th December, 1971, Hardie applied for registration of the composite marks of "Spartan" and Hardies device in respect of surface coatings. However, the application was withdrawn on 26th April, 1974.9. In November 1976, Addisons obtained registration of the standing warrior device. In the same year fit filed three applications before the Registrar of Trade Marks at Mumbai for registration of Hardies trademarks. The applications were rejected on the grounds of identity and deceptive similarity with Hardies registered trademarks.10. During this period, that is between 1972 to 1977, negotiations took place between Hardie and Hansa, the second appellant before us, for appointing Hansa, the registered user of Hardies trademarks in India. The agreement was ultimately executed on 31st March, 1977.11. About two months later, on 30th May 1977 Addisons applied in Calcutta for rectification of the Register of Trademarks by deleting Hardies trademarks under Section 46(1) of the Act.12. On 18th November, 1977, Addisons filed two applications for registration of Hardies device. Addisons also filed three additional applications for registration in class (2) of the Hardies device and the word Spartan in class (2) for the word of Spartan Velox and for class (3) for Hardies device with the word Spartan.13. During the pendency of these applications for rectification and registration, Hardie and Hansa filed two suits (Suit Nos. 835 and 836 of 1978) in the Calcutta High Court in November, 1978, for inter alia an injunction restraining Addisons from dealing in paints and other surface coatings under Hardies trademarks or device. Interlocutory applications were filed by Hardie and Hansa in these suits which were disposed of by a consent order on 22nd February, 1979. The consent order in effect allowed Hardie and Hansa to continue to use the registered trademarks and device of Hardie, and allowed Addisons to use its registered trademarks and device of the standing warrior until the disposal of the suits. The suits are still pending. The scope and effect of this consent order is also one of the issues to be determined in these appeals.14. December 1979 saw Addisons file a civil suit in the Madras High Court (CS No. 204 of 1978) against Hansa seeking a permanent injunction restraining Hansa from selling paints in containers which were identical to or deceptively similar with Hardies trademarks or device which Addisons claimed had been used by it since 1963. An application was filed by Addisons in the suit pending before the High Court in Madras in 1979, alleging that Hardie and Hansa had committed contempt by using Hardies device. This was disposed of eventually by the Madras High Court with the direction that status quo was to be continued in terms of the consent Order dated 22nd February, 1979 in the Calcutta High Court proceedings. The suit is pending.15. In the same month, Hardie filed an application in the Calcutta suit for stay of the rectification proceedings which were then pending before the Joint Registrar of Trade Marks at Calcutta. The application was dismissed by the learned Single Judge of the Calcutta High Court and the appeal therefrom dismissed by the Division Bench. The application for rectification filed by the Addisons was allowed by the Joint Registrar of Trade Marks at Calcutta by his order dated 12th September, 1985 as a result of which Hardies trademarks were expunged from the Registrar of Trade Marks. Both Hardie and Hansa appealed against this order to the Calcutta High Court before a learned Single Judge. The appeal was dismissed on 6th July, 1990. On a further appeal the Division Bench confirmed the learned Single Judges order on 22nd August, 1997. The decision of the Division Bench is the subject matter of SLP No. 206 of 1998.16. Pending the rectification proceedings in Calcutta, an application was filed by Hansa for stay of the registration proceedings relating to Spartan and Spartan Velox. The application was rejected by the Assistant Registrar, Madras on 19th June 1989. On the same day Addisons application for registration of Hardies device was allowed. Although five appeals were preferred in respect of each of the separate applications before the Madras High Court the learned Single Judge dismissed all the five appeals by a common judgment.17. The matter came up before the Division Bench. There was a difference of opinin. The Third Judge agreed with the view that the appeals should be dismissed. The majority decision is the subject matter of challenge in C.A. Nos.of 1993.18. Till the decision of the Madras High Court Hansas and Hardies opposition to Addisons applications for registration of Spartan and Spartan Velox were still pending. On 2nd June, 1992, the applications were allowed by the Registrar at Madras. This has been challenged in C.A. Nos. 5312 & 12A3 of 1993.19. When leave was granted on the special leave petition filed by Hansa and Hardie on 8th October 1993 impugning the order of the Madras High Court, this Court had directed the continuation of the status quo. That status quo is still operative. This is brief is the background of the appeals.

Court's reasoning:
29. The phrase person aggrieved is a common enough statutory precondition for valid complaint or appeal. The phrase has been variously construed depending on the context in which it occurs. Three sections viz. Sections 46, 56 and 69 of the Act contain the phrase. Section 46 deals with the removal of a registered trademark from the register on the ground ofThis section presupposes that the registration which was validly made is liable to to be taken off by subsequentSection 56 on the other hand deals with situations where the initial registration should not have been or was incorrectly made. The situations covered by this section includea) the contravention or failure to observe a condition for registration; (b) the absence of an entry; (c) an entry made without sufficient cause; (d) a wrong entry; and (e) any error or defect in the entry. Such type of actions are commenced for the purity of the register which it is in public interest to maintain. Applications under sections 46 and 56 may be made to the Registrar who is competent to grant the relief. "Persons aggrieved" may also apply for cancellation or varying an entry in the register relating to a certification trademark to the Central Government in certain circumstances. Since we are not concerned with a certification trademark, the process or registration of which is entirely different, we may exclude the interpretation of the phrase "person aggrieved" occurring in section 69 from consideration for the purposes of this judgment.30. In our opinion the phrase person aggrieved for the purposes of removal on the ground ofunder section 46 has a different connotation from the phrase used in section 56 for canceling or expunging or varying an entry wrongly made or remaining in the Register.31. In the latter case the locus standi would be ascertained liberally, since it would not only be against the interest of other persons carrying on the same trade but also in the interest of the public to have such wrongful entry removed.The observation of the Division Bench that apart from special circumstances, there was no other defence available to a proprietor in proceedings to remove his trademark from the register, is as we have already indicated, incorrect. The proprietor can show, as Hardie, has done in this case, that there was no intention to abandon the trademarks. If, that is established it is a complete defence to the action. The second erroneous finding of the Division Bench was that economic viability or existing market condition was outside the concept of special circumstances. The finding does not follow from the Section and is against the weight of authority.56. Special circumstances have been defined in Aktiebolaget Manus vs. R.J. Fullwood and Bland, Ltd., (1949) 66 RPC 71, as "some external forces as distinct from voluntary acts of an individual.." where the impact of local condition makes impractical the ordinary usage of international trade". In that case it was held prohibitive tariffs which were practically effective to keep out of England altogether machines manufactured abroad which had, till the tariffs had been imposed, been imported to the country amounted to special circumstances. The facts in Manus case are similar to the facts which we have to consider. In dispute were trademarks as applied to milking machines. The proprietor of the marks was a Swedish company. The machines had been imported into Britain through the defendant as its agent. When the import of the milking machines was stopped by the registered proprietors, the agent claimed the trademarks as its own and started manufacturing and selling milking machines bearing the same trademarks. The proprietor brought an action for infringement of its trademarks. The question before the Court was whether the actions of the defendant subsequent to the tapering off of the import of the Swedish Companys machines, were effective to appropriate to themselves what had been before the Swedish Companys property or as having been effective to destroy the distinctive character of the name as indicating the Swedish Companys business so as to put an end to its right to the name in England. The question was answered in the negative and it was held that thewas justified because of the special circumstances prevailing at the relevant period.57. In Mouson & Co. vs. Boechm (supra), it was said that "A man who has a trade mark may properly have regard to the state of the market and the demand for the goods; it would be absurd to suppose he lost his trade market by not putting more goods in the market when it was glutted".We cannot ignore the fundamental fact that what Hardie and Addisons had been engaged in together was the introduction and sale in the Indian market of the paints and lacquers prepared according to Hardies preparation and under Hardies trademark. In this background, where, by legal fiction atleast Hardie had used the trademarks from 1946 to 1961, it would be a legally insupportable proposition if we were to hold that the names Spartan and Spartan Velox were associated with Addisons and not with Hardie. Therefore, when the applications for rectification were made, there was nothing in law to associate Addisons with the trademarks in question. This background coupled with Hardies attempts to appoint Hansa as the registered user of the trademark in India must be kept in sight while considering the plausibility of the defence of special circumstances under the provisions of Section 46(3) of the Act.63. Hardie had brought on record the Import Trade Control Policies for the relevant years. We have considered the same and it is quite clear that paints, distempers, varnishes and lacquers could be imported only for use by actual users i.e. by manufacturers or producers of the paints etc. in India. Hardie had no such factory. There was in the circumstances no question of Hardie importing any paints and lacquers manufactured by it outside India into the country. There was a second restriction under the Import Control Policies even on actual users who imported paint for their own use. They had to use the imported goods for producing goods as specified only for export. The intention of the policy clearly was to keep the domestic market for the domestic producers of paints and lacquers. Concerns like Hardie could not, without making an enormous investment by setting up a factory, import the goods.64. In the circumstance, for Buttress to have said that it was not economically possible for Hardie to itself put its manufactured goods in the market immediately, cannot be taken as being a circumstance which was peculiar to Hardie alone. It was a circumstance which was generally applicable to all foreign manufacturers of paints and lacquers. Therefore, the conclusion of the Joint Registrar and the High Court that there were no special circumstances in the trade which justified the allegedfor he period in question was wrong. In view of our findings, it is not necessary to go into the further question of the discretionary power of the Registrar to refuse rectification even if the application is otherwise maintainable.Therefore, Addisons voluntarily undertook to the High Court that it would not use the mark Spartan or the device of theuntil the disposal of the suit. It is not in dispute that the suit is still pending. It has never been and is not Addisons case that the consent was obtained by any fraud or by exerting undue pressure. In fact on 30th April 1982, there is an order of the High Court of Calcutta which records Addisons reiteration that it would not use the markwhich was claimed by Hardie and Hansa. Irrespective of whether these orders sanctioned the use ofby Hansa and Hardie, the question is whether they show that Addisons had ever used or showed any intention to use the device ofThe third part of the consent order is that Addisons would not object to Hardie and Hansa selling their products as long as they distinguish their goods from those of Addisons. Pursuant to the consent order dated 22nd February 1979 w.e.f. 3rd September 1979 Hansa started using the Spartan trade mark with the warrior device of Hardie on the products manufactured by it and has continued to do so.78. It has not been shown to us how a consent order differs from any other form of agreement except that it may have additional sanctity by reason of the imprimatur of the Court. And yet, the High Court came to the conclusion that Hansas use of the device subsequent to the consent order was "by brute use in controversial circumstances". We are at a loss to understand how the High Court could have deduced that the use of the mark by Hansa during the pendency of the proceedings was not bona fide.79. The High Court in wrongly casting the onus on Hardie and Hansa by saying that they had not been able to produce "any other relevant material to indicate that there was no bona fide intention on the part of Addisons to use the mark at the time when they made their applications: did not consider whether Addisons had positively proved its use and intention to use the device.80. We are of the view that the dissenting judgment of Swamidurai, J. was correct. The learned Judge had correctly emphasised that Hardie had manufactured and was the first to market its goods under its registered trade mark and device in India. the learned Judge also correctly construed the consent order. No one hadAddisons into giving its consent. That is also not Addisons case. There are other factual errors in the majority view but it is not necessary to go into those as what we have found is sufficient to set aside the decision impugned and to allow the appeals.81. Even if we had held in Addisons favour on all other points we would have thought that this was a fit case where the Assistant Registrar should have exercised his discretion under Section 18 and rejected Addisons application for registration. Not only was no positive proof of an intention to use the device or the trade marks adduced by Addisons but the evidence shows a conscious abandonment of the device in 1971 by the issuance of the public advertisements. When did Addisons intention to use the device form? What was the necessity to revive the use of the device mark in respect of paints after an interval of almost 7 years? The answer to these issues would be relevant on the question of the bona fides of the Addisons applications and yet was neither raised nor considered either by the Registrar or by the High Court. On the other hand taking into consideration the continued user of the mark since 1979 by Hansa, it should have been assumed that the device had over the period of so many years become distinctive of Hansas product and therefore to allow registration of the device in Addisons name might deceive the public.There is no dispute that the marks which were the subject matte of Addisons application for registration before the Registrar of trademarks at Madras were identical with Hardies marks of Spartan and Spartan Velox. Although, the appellant has impugned the decision of the Registrar inter alia on the ground that the order passed by the Registrar on 2nd June, 1992 was without notice to the appellant and in violation of Section 102 of the Act, it is not necessary to express any opinion on the submissions. The appeals must be allowed on the short ground that we have held that Hardies trademarks could not have been removed from the Register and a long as the registration of the marks continue in the name of Hardie, the application for registration of the same marks in the absence of any plea of bonafide concurrent user under Section 12 would not arise.