Delhi High Court in Hero Electric Vehicles (P) Ltd. v. Lectro E-Mobility (P) Ltd., stated that “Where a valid arbitration agreement exists, the decision also underscores the position that, ordinarily, the disputes between the parties ought to be referred to arbitration, and it is only where a clear “chalk and cheese” case of non-arbitrability is found to exist, that the court would refrain from permitting invocation of arbitration clause.”
The present suit has sought a decree of permanent injunction, restraining the defendants from dealing in electric bikes having a throttle, using “Hero” or any mark deceptively similar as a trademark, brand name or trade name as it infringes the said mark, or result in passing off the defendant’s electric bikes having a throttle as those of the plaintiffs.
In the said case filed under Section 8 of the Arbitration and Conciliation Act, 1996, the defendant sought reference to the dispute.
In the Supreme Court decision of Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1, Court authoritatively expounded on the scope of the jurisdiction of a Court, examining an application under Section 8 of the 1996 Act.
The bench observed that this Court and other High Courts had followed the decision in Vidya Drolia.
Further, while discussing the principles that emerged from the above decision, Court stressed upon criterion (viii), which as follows:
(viii) The scope of examination by the Court exercising jurisdiction under Section 8 or Section 11 is prima facie in nature. The Court is not to enter into the merits of the case between the parties. It is only to examine whether the dispute is prima facie arbitrable under a valid arbitration agreement. This prima facie examination is intended to weed out manifestly and ex facie non-existent or invalid arbitration agreements or non-arbitrable disputes, thereby cutting the deadwood and trimming off the side branches in cases where the litigation cannot be allowed to proceed. The proceedings are preliminary and summary and should not result in a mini-trial. Unless there is a clear case of non-existence of a valid arbitration agreement or the dispute being ex facie non-arbitrable, tested on the above parameters, the court should leave these aspects decided by a competently constituted arbitral tribunal. Relegation to arbitration should be regarded as a rule, and resolution by the civil court, where a valid arbitration agreement exists and is sought to be invoked by one of the parties, as an exception. The expression “chalk and cheese situation”, as used by this Court, has, in this background, been approved by the Supreme Court. “When in doubt,” says Ramana, J., in his concurring opinion, “refer”. (Having said that, the “doubt”, in my view, has to be authentic and substantial, and not merely an escape route to avoid examining the issue in perspective.)
Adding to the above, Bench stated that while examining the aspect of arbitrability of the dispute, or the existence of a valid arbitration agreement binding the parties, in the exercise of Section 8, Court has to always remain alive to the fact that it is exercising the very same jurisdiction which the Arbitral Tribunal is empowered to exercise.
“…where the Court finds the case to be “chalk and cheese”, and where referring the matter to the arbitral process would be opposed to public interest or public policy, and a futility ex facie, that the Court should nip the request for referring the dispute to arbitration in the bud.”
Bench agreeing with Mr Akhil Sibal stated that the dispute between the plaintiffs and the defendants required a holistic appreciation of the FSA and the TMNA, their various covenants and the interplay to adjudicate on the rights conferred different family groups.
Adding to the above, court stated that the disputes between parties are ex-facie arbitrable, seen in the light of the provisions of the FSA and TMNA.
The controversy does not relate to the grant, or registration, of trademarks in the present case. The trademark already stood granted and registered before the FSA and TMNA.
The dispute is regarding the Family Group to which the rights to use the said trademarks, in connection with electric cycles and e-cycles, had been assigned by the FSA and TMNA.
Because of the above, Bench stated that the dispute does not fall under any of the categories of disputes excepted by the Supreme Court, from the arbitral umbrella.
The right that the plaintiffs seek to assert, in the plaint, is clearly against the F-4 group and the F-4 group alone and not against the whole world.
The dispute is inter-se amongst two Family Groups, pillowed on the rights emanating from the Family Settlement Agreement and Trade Mark and Name Agreement and essentially alleged infraction of the terms of the FSA and TMNA, not of the provisions of the Trade Marks Act.
The right asserted by the plaintiffs is not a right that emanates from the Trade Marks Act, but a right that derives from the FSA and the TMNA and is not asserted vis-à-vis the whole world but is explicitly asserted vis-à-vis the F-4 Family Group.
Because of the above discussion, Court decided that it would be more appropriate if the petitioner were to present the present plaint before the Arbitrator and seek any interim or interlocutory relief as it may choose under Section 17 of the 1996 Act.
Hence, the suit shall be referred to as Arbitration. Parties would be at liberty to appoint the arbitrator/arbitrators following the covenants of the FSA and TMNA and or approach the Court.
 2021 SCC OnLine Del 1058.
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