Arbitration Clause Compels Referral of Trademark Dispute to Arbitral Tribunal; SLP Dismissed

A Bench of Justices J.B. Pardiwala and R. Mahadevan heard the Special Leave Petition challenging a Madras High Court order that affirmed a Commercial Court’s referral of a trademark infringement and passing-off suit to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996. The petitioners assailed the reference to arbitration for disputes arising out of alleged fraudulent assignment of a trademark and sought reinstatement of the civil suit.

The Court dismissed the Special Leave Petition and held that the presence of a valid arbitration clause required the civil court to refer the parties to arbitration. The Court reiterated settled law that, where an arbitration agreement covered the subject-matter, a judicial authority was under a “positive obligation” to refer the parties to arbitration and had no discretion to obviate that mandate. The Court, in its reasoning, observed: “Once there is an arbitration agreement between the parties, a judicial authority before whom an action is brought covering the subject-matter of the arbitration agreement is under a positive obligation to refer parties to arbitration by enforcing the terms of the contract. There is no element of discretion left in the court or judicial authority to obviate the legislative mandate of compelling parties to seek recourse to arbitration.” The Court further noted that allegations of fraud or challenges to execution did not ipso facto oust arbitration, echoing that “mere allegation of fraud is insufficient to avoid an arbitration proceedings” and that issues of validity or alleged coercion were matters for the arbitral tribunal to decide.

Background The dispute originated from C.O.S. No. 147 of 2023 instituted by the petitioners in the Commercial Court, Coimbatore, seeking permanent injunctions and damages of Rs. 20 lakhs against the respondents for alleged infringement and passing off of the mark “Sri Angannan Briyani Hotel.” The respondents filed an application under Section 8 relying on Assignment deeds dated 20.09.2017 and 14.10.2019 that contained Clause 15 – a dispute resolution clause stipulating conciliation followed by arbitration and, failing that, recourse to the courts at Coimbatore. The Commercial Court allowed the Section 8 application on 06.02.2024, finding that the controversy “was addressed, more or less exclusively, around two contractual arrangements, namely Assignment deeds,” and that the reliefs sought fell within the scope of the arbitration clause.

The petitioners contended that the Assignment deeds were fraudulent, executed on blank papers or forged, and that the dispute involved rights in rem under the Trade Marks Act which rendered the matter non-arbitrable. The High Court rejected the civil revision petition, holding that the assignment was contractual in nature, that the existence of the arbitration clause was not disputed, and that allegations of fraud which were confined to inter partes matters did not oust the jurisdiction of arbitration. The High Court relied on precedents including Kvaerner Cementation, A. Ayyasamy, Booz Allen, Vidya Drolia and recent decisions clarifying arbitrability and the limited role of courts on Section 8 applications. The Supreme Court endorsed that approach, observed that the law on the subject was “no longer res integra,” and emphasised that allegations of fraud giving rise to questions of fact or to issues of “full and final settlement” are arbitrable and for the arbitral tribunal to examine. The petition was dismissed and no costs were awarded. No interim directions were issued; the parties were left to pursue arbitration.

Case Details: Case No.: SLP (C) No. 13012 of 2025 (2025 INSC 687) Case Title: K. Mangayarkarasi & Anr. v. N.J. Sundaresan & Anr. Appearances: For the Petitioner(s): Mr. V. Prakash, Senior Counsel For the Respondent(s): Mr. P.R. Ramakrishnan, Advocate (appearing in earlier proceedings as per record)