10 May 1996
Supreme Court


Case number: C.A. No.-008266-008266 / 1996
Diary number: 11307 / 1994






DATE OF JUDGMENT:       10/05/1996


CITATION:  JT 1996 (5)   145        1996 SCALE  (4)528



JUDGMENT:                       J U D G M E N T K. Ramaswamy, j.      Leave granted.      We have heard learned counsel on both sides.      The admitted  facts are  that the  respondents  through their agents  had registered  trade mark "Raleigh" and other trade marks  (12 marks)  under the  Indian Merchandise Marks Act, 1889  (4 of  1989) and  the Trade Marks Act, 1940 (5 of 1940). The  Trade and  Merchandise Marks  Act, 1958  (43  of 1958) (for  short, the  ’Act) which  came  into  force  with effect from October 3, 1958 has repealed the Predecessor Act and now  the Act  is in  operation. The  respondents entered into an  agreement with Sudhir Kumar Sen on November 3, 1948 to render  technical know-how  to the  Indian Company  to be formed which  would manufacture  bicycles  and  market  them under Raleigh’s  Indian Trade  marks.  Pursuant  thereto,  a company called  Sen Raleigh  Ltd. came  into existence which manufactured  cycles   with  technical   assistance  by  the respondents-Raleigh Industries  of  U.K.  and  marketed  the bicycles with  a brand name and trade marks belonging to the respondents. On  April 24, 1954, Sen Raleigh was recorded as permitted users  of the  trade  marks.  By  agreement  dated December 29,  1962, Sen  Raleigh and  the respondents agreed that Sen Raleigh was registered user for further period upto 1976. Sen  Raleigh was taken over by the Government of India on September  8, 1975  under the  IDR Act and the Government took over  the management  of Sen Raleigh ltd. The agreement dated December  29, 1962  was modified  and the  respondents were given  option to  terminate the agreement. An agreement dated  December  20,  1976  was  entered  into  between  the appellant, as  registered user and the respondent in respect of 12  trade marks  for a  period of  5 years.  On March 28, 1978, joint  application by  Sen Raleigh  and the  appellant duly signed  by the respondent as proprietor and Sen Raleigh Ltd. as registered user came to be made before the Registrar



of Trade  Marks.  On  October  24,  1980,  Sen  Raleigh  was nationalised and  got vested in the appellant-Corporation by publication of  the notification  under IDR Act. On March 5, 1982, the respondent wrote a letter to the appellant that in the absence  of a  new agreement they were instructing their advocate to  prevent the  appellant by restraint proceedings to use the trade mark effective from April 1, 1982.      On March  24, 1982,  the appellant  made an application under Sections  32,  46  and  56  of  the  Act  against  the respondents in  the High Court of Calcutta in Suit No.266/92 pleading, inter  alia, that  the respondents  had failed  to provide technical  assistance by passing the technical know- how to  Sen Raleigh  after November  1,  1976.  Neither  the appellant nor Sen Raleigh were registered users of the trade mark after  November 1,  1976 under Section 48(2) of the Act upto the  date of one month before filing that rectification application. A  continuous period  of 5  years or longer had passed and the trade mark had not been bona fide used by the respondent. Having regard to the extended nature of non-user of the  concerned trade  mark after  November 1,  1976,  any further use  of the  said trade marks by the respondents was likely to  deceive and  cause confusion  to  the  trade  and public alike  in India  etc. Simultaneously,  an application for registration  of three  trade marks  An their favour was filed by  the appellant  on March  25, 1982.  By proceedings dated June  13, 1984,  the Registrar of Trade Marks informed the appellant  that the  registered user’s applications were abandoned since  the appellant  failed to  comply  with  the statutory requirements.  The learned  single Judge dismissed the application  by his  judgment dated  September 13,  1990 holding,  inter  alia,  that  any  proprietor  mentioned  in Section 46(1)(b)  of the Act extends to bona fide user other than registered  users. Special  circumstances as  a defense were available  to the  respondent for  non-user; even after 1979, the  supply-technical know-how  by the  respondent was not totally  absent. After  termination of the collaboration and user agreement between the appellant and the respondents it was  likely to  cause confusion and deception amongst the trade and  public. The  conduct of  the respondents  was not violative of  Section 32(b)  and (c).  The  Court  in  those circumstances declined  to rectify the trade mark and strike it off  from the  register of  trade marks.  On appeal,  the Division Bench in Appeal No.13/91 confirmed the same holding that on  and from  October  25,  1980,  the  respondent  had allowed and  permitted the appellant to manufacture bicycles etc. according  its specifications and to pass off the goods under  their  trade  marks.  Though  the  collaboration  and registered user  agreements stood  expired from  October 31, 1981, no  agreement came to be executes nor continued to use the  specifications  on  technical  know-how.  There  is  no specific bar  for an unregistered lincesee to use registered trade mark so long as there is a connection in the course of trade between  the licenser  and the lincesee. The appellant was unable  to prove that there had been no such user of the trade mark  for a  continuous period  of 61 months or longer and the  lack of  bona fide intention The expression "by any registered proprietors  in Section  46(1)(b) should  not  be restricted to  user by  proprietor or  registered  user  who should also  include  bona  fide  or  authorised  users  The legislature did  not intend  to register  proprietor  to  be deprived of their property at the instance of user whose use is unregistered.  The expression,  therefore, should  not be restricted  to   user  by  the  proprietor  himself  or  any registered user  but should also take into account bona fide authorised user.  Non registration  of the user agreement by



Sen Raleigh  and the appellant was due to the default of the latter. The  appellant had  not taken  any steps to withdraw registered user  applications and  as  such  should  not  be permitted to take such a contradictory stand of applying for rectification at  the same  time. The power under Section 46 is discretionary. In view of the appellant’s conduct, it was taking  advantage   of  its   own  wrong.   The  discretion, therefore,  was   not  to  be  extended  in  favour  of  the appellant. Thus, this appeal by special leave.      Shri Raju  Ramchandran, learned  senior counsel for the appellant, raised  three-fold contentions. It is his pivotal contention that  undisputedly when the respondent was not in urge of trade mark as "a registered proprietor" or its agent Sen Raleigh  as Permitted  user" for  a period  of  5  years immediately preceding  the date  of  the  application  under Section 46  for removal of the trade mark from the Register, there was  no bona  fide user  thereof in  relation to those goods by  the proprietor himself. The respondents admittedly did not  use the  same. The  appellant cannot  be said to be either the  proprietor of  the trade  mark since 1976, since the agreement  lapsed or  permitted user-.  The  High  Court therefore was  wrong in holding that 5 years’ period had not lapsed. The harmonious construction should be put up in such a way that Section 48(2) and Section 466 by of the Act could be permitted  to have  their- full play in their operational structure. The construction put up by the High Court renders sub-section (2)  of Section  48 otiose  or surplusage  which interpretation is  impermissible. It  is contended  that the registered user  must be  understood to  be the  user by the proprietor or  authorised user  registered under Section 48. The period  of 5  years should be computed from that date of expiry of registered user. The Division Bench,therefore, was wrong in  its conclusion  that the  appellant has  failed to establish it. On the other hand, it is for the respondent to prove the  same.  He  further  contended  that  the  special circumstances enumerated  in sub-section  (3) of  Section 46 must be  such that  the respondents  had intended to use the registered trade  mark. For  over a  long period,  the trade mark was  not used  by the  respondents  as  its  registered proprietor. The  respondents did  not prove  that they  were prevented to  use the same for 5 years or more preceding the date of  the application.  The burden is on tile respondents to prove  that non-user  was due  to special circumstance of the trade  and not  due to some other cause which would have operated whether  special circumstances  had arisen  or  not Since the  respondents were  not using  the trade mark since April 20,  1954, the  plea of  special circumstances  is not available to  the respondents.  The Division  Bench  or  the learned single  Judge did  not record  any finding as to the period upto  which the bicycles could be imported into India and the  period during  which the  ban was  imposed but  for which the respondent had an intention to import bicycles but were prevented  to do so due to the ban. In the absence of . such a  findings the High Court was wrong in law in refusing to rectify  the trade mark and striking it off the register. The Court  while exercising  its discretion under Section 46 should look into not only commercial interest of the parties but also  public interest.  In normal circumstances, when it is established  that the  trade mark  was not used either by the registered  proprietor or the permitted user, the public interest of  supply of  the quality of the goods marketed by the appellant should be taken into factual consideration for removal of the trade mark from the register.      Shri  Ashok   Desai,   learned   senior   counsel   for respondents, resisted  the  contentions.  According  to  the



learned  counsel,   the   respondents   have   collaboration agreement with  Sen Raleigh  which was  taken  over  by  the Government  under   IDR  Act   and  the  appellant  came  to manufacture, with  the technical  know-how supplied  by  the respondents, the  Raleigh  bicycles  under  the  trade  mark registered  by  the  respondents  in  the  register  of  the Registrar under the Act. The appellant was using the same as an agent.  The operation  of Section 48(2) must be construed in such  a way  that the  bona fide  user  even  by  a  non- registered  user,   so  long   as  there  exist  a  rational connection between  the proprietor  of the  trade  mark  and passes off  the goods  in the  market  manufactured  by  the appellant, is  construed to  be a  bona fide user for and on behalf   of   the   registered   proprietor,   namely,   the respondents. Admitted  position is that the respondent being the registered proprietor, until it is proved that its trade mark was  not used to pass off the goods manufactured by the appellant and  that the  appellant had discontinued the user and 5 years lapsed thereafter, the non-use of the trade mark continues thereafter,  the rectification  application  under Section  46   (l)(b)  would  be  ordered.  In  view  of  the prohibition to import bicycles, the respondent was prevented to use the trade mark but by collaboration agreement, it was continuing to  use the trade mark by the permitted user. The special  circumstance   is  that   the  appellant  filed  an application  for   registration  under   section  48(1)  and continued it  till  it  was  abandoned.  It  would  also  be considered as  a special  circumstance  for  non  user.  The discretion exercised  by the  Court must  be judged  in  the light of  the facts  and circumstances, The appellant having used the  trade mark,  it does  not lie  in the mouth of the appellant to  contend that  he is  not a permitted user or a bona fide user of the trade mark.      In  view  of  the  diverse  contentions,  the  question arises: whether  the High  Court was  right in  refusing  to rectify and  strike off  the trade  marks of the respondents from the  register of trade marks? Section 46(1)(b) reads as under:      "46.  Removal   from  register  and      imposition of limitations on ground      of non-use.  - (1))  Subject to the      provisions   of   section   47,   a      registered trade  mark may be taken      off the  register in respect of any      of the goods in respect of which it      is registered  on application  made      in the  prescribed manner to a High      Court or  to the  Registrar by  any      person  aggrieved   on  the  ground      either -      (a) xxx xxx xxx xxx      (b) that  up to a date of one month      before the date of the application,      a continuous  period of  five years      or longer  had elapsed during which      the trade  mark was  registered and      during which there was no bona fide      use thereof  in relation  to  those      goods by any proprietor thereof for      the time being."      Sub-section (3)  envisages that  "an application  shall not be  entitled to  rely for  the purpose  of clause (b) of sub-section (1)  or for  purpose of  sub-section (2)  on any non-use of  a trade  mark which is shown to have been due to special circumstances  in the trade and not to any intention



to abandon  or not  to use the trade mark in relation to the goods to which the application relates". Section 48 provides for registered users which reads thus:      ’48.  Registered   users.   -   (1)      Subject  to   the   provisions   of      section 49, a person other than the      registered proprietor  of  a  trade      mark  may   be  registered  as  the      registered user  thereof in respect      of any  or  all  of  the  goods  in      respect of  which the trade mark is      registered  otherwise   than  as  a      defensive  trade   mark;  but   the      Central Government  may,  by  rules      made in  this behalf,  provide that      no application  for registration as      such shall  be  entertained  unless      the agreement  between the  parties      complies with  the conditions  laid      down in  the rules  for  preventing      trafficking in trade marks.      (2) permitted  use of  a trade mark      shall be  deemed to  be use  by the      proprietor thereof.  and  shall  be      used by  a person  the  proprietor.      for the  purpose of  section 46  or      for any  other  purpose  for  which      such use  is  material  under  this      Act or any other law.      it would, thus. be apparent that subject to section 46, for   a registered  trade mark   up to date within one month before the date of making application  for rectification for a continuous period of 5 years or longer if registered trade mark had  not been use during that period, there was no bona fide user  in relation  to those  goods  by  the  proprietor thereof for  the time being. The  trade mark should be taken off and  struck out  form the  register of  trade  marks  in respect of  any goods  in respect of which the trade mark is registered  .   Sub-section  (3)   enables  the   registered proprietor to  show special circumstances for the non use of the trade  mark due  to which circumstances in the trade, he could not  use the  trade mark  for the above period and not with any  intention to  abandon the use of trade mark or not to use  the trade  mark in  relation to  good to  which  the application for  rectification relates.  Sub-section (2)  of Section 48 give defence to "permitted user" in relation to a registered trade mark. It means the use of the trade mark by a registered user of the trade mark in relation to good with which he  is connected in the course of trade and in respect of which  the trade  mark remains  registered for  the  time being and  for which  he is  registered as a registered user and which  complies with  any conditions  or restrictions to which the  registration of  the trade marks is subjected to. Section 48  (1) envisages  that subject to the provisions of Section 49, a person other than the registered proprietor of a trade  mark may  be  registered  as  a  "registered  user" thereof in  respect of any or all of the goods in respect of which  the  trade  mark  is  registered  otherwise  than  as defensive trade  mark. The permitted use of trade mark shall be deemed  to be used by the proprietor thereof and shall be deemed no  to be  used by a person other than the proprietor for   the purpose of Section 46 or for any other purpose for which such  use is  material under the Act or any other law. The Central  Government is  empowered to prevent trafficking in trade mark.



    It would,  therefore, be  clear that a permitted use of the trade  mark should  be done  under  sub-section  (1)  of Section 48. It Should be either by the registered proprietor of the  trade mark  or a  person other  than the  registered proprietor registered  under Section  48(1) to use the trade mark by  operation  of  sub-section  (2).  An  un-registered person under  Section 48(1) or a person who did not register under Section  (1) of Section 48 shall not be deemed to be a registered user  for the  purpose of Section 46 or any other law.      The High  Court  recorded  a  finding  and  it  is  not disputed across the bar, that the appellant had entered into an agreement with Sen Raleigh which was a permitted user and used the  trade mark till November 1, 1976 and thereafter by registered user agreement dated December 20, 1976 used trade mark for a period of 5 years. It is not in dispute that till date of  filing of  the application,  the appellant used the trade mark  in passing off the bicycles under the trade mark of the  respondent. The question, therefore, is: whether the appellant must  be deemed  to be bona fide user of the trade mark, though there was no agreement nor was it registered as permitted user under Section 48(1)? on admitted position and in the  facts and circumstances, we are of the view that the appellant was a ago user of the trade mark of the respondent in passing  off the  bicycles under  the trade  mark of  the respondent who,  admittedly, is  a registered proprietor. It is true,  as held  by this  Court, that  to get a trade mark registered without  any intention  to use  it in relation to any goods  but merely  to make money out of it by selling it to others,  the right  to use  it as  a commodity  would  be trafficking in  that trade mark. It requires to be prevented and prohibited.  The Court would not lend assistance to such registered proprietors of the trade mark. There must be real trade connection  between the  proprietor of  the trade  and licensee of  the goods  and the  intention to  use the trade mark  must   exist  at  the  date  of  the  application  for registration of  trade  mark  and  such  intention  must  be genuine and  bona fide  and continue  to subsist in order to disprove the  charge of  trafficking in  trade mark. It is a question of fact in every case. The question is: whether the trade connection  exists to dispel the charge of trafficking in the  trade mark?  This question  was considered  by  this Court  in   American  Home   Products  Corporation  vs.  Mac Laboratories Pvt  Ltd & Anr  [(1986) 1 SCC 465 in paragraphs 38 and 39] and they need no reiteration.      It is  seen that  preceding the  nationalization of the Cycle  manufacturing   industry  under   the  IDR  Act,  the respondent had  a collaboration  agreement with  Sen Raliegh who was  a registered  user under  Section 48. From him, the appellant came  to succeed  by statutory  operation. It was, therefore, not  a case  of getting the trade mark registered under the  Predecessor Act  and continuing under the Act for trafficking of the trade mark. It is true that under Section 43(1) either the registered proprietor or a permitted person is required  to register  as permitted  user. The benefit of Section 46  would be  available during  the period for which the agreement  registered and  user continued in furtherance thereof. It  appears that  even an unregistered licensee, so long as  there is  unbroken Connection  in the course of the trade between  the licensor  and the  passing off lincesee’s goods under  the  trade  mark,  there  would  be  sufficient connection in the course of the trade between the proprietor and bona  fide user  of the trade mark by unregistered user. It  must,   therefore,  be   held  that  though  the  deemed presumption under sub-section (2) of Section 48 is referable



to the permitted user or the registered user and it does not extend to  unregistered permitted  user, the Connecting link of passing  off the  goods between the licensor’s trade mark and the  lincesee should bona fide be with the permission or Consent which  may be  express or  implied by long course of dealings. It would connect the registered proprietor and the user of  the trade  mark by  the unregistered  lincesee. The appellant must be presumed by course of conduct that he is a bona fide user for the purpose of Section 46(1)(b).      In K.R  Beri & Co. vs. The Metal Godds Mfg. Co Pvt Ltd. and Anr  [AIR  1980 Delhi  299], the Division Bench construed Section 48(2)  and held  that an  unregistered user  of  the trade mark even With the consent of the proprietor cannot be construed to  be a  registered user  under Section 48(1) and such construction  renders sub-section  (2)  of  Section  48 surplusage or  otios, which  is impermissible  by  statutory construction. We  have given  anxious consideration  to  the reasoning therein. On strict interpretation, the view of the Division Bench  may be correct but it is not correct to hold that by  a bona  fide user  of  an  unregistered  user  when connection between  the proprietor of the trade mark and the permitted user  in relation  to passing  off the goods under the trade  mark are  proved, it  does not render sub-section (2) of Section 48 surplusage or otios.      It is  true that  the burden  flies on  the  registered proprietor of  the trade  mark to  establish  the exceptions provided under  Section 46(3).  Equally, the  applicant  for rectification  also  prima  facie  shows  non-user  for  the relevant period. Then the burden shifts to the proprietor of the  trade   mark  to   affirmatively  prove   the   special Circumstances for  non-user of  trade mark. It must be shown that the  non-use of  the  trade  mark  is  due  to  special circumstances of  the trade  and not due to some other Cause which would have operated, whether the special Circumstances had arisen  off not.  Although the  special circumstances of trade taken  by themselves  would have  prevented the use of the trade  mark. If  the non-user  was, in fact, due to some other circumstances  and  would  have  occured  whether  the circumstances had  followed or not, subsection (3) would not apply.  It  must,  therefore,  be  duty  of  the  registered proprietor to  show What  non-user was  strictly due  to the special circumstances  of trade  and not of any intention on the part  of the  registered proprietor not to use the trade mark during the relevant period.      Though there  was a ban on impart of the Raleigh cycles manufactured  outside   India  and   passed  off  under  the registered  mark   of  the   respondents  as   a  registered proprietor, the  circumstances do not  attracted sub-section (3) of  Section 46  to relieve  the respondents to establish non-user, but  on the  facts  of  this  case,  we  have  the admitted  position  that  Sen  Raleigh,  admittedly,  was  a registered user  through which  the appellant  had bona fide used the  registered trade mark of the registered proprietor There is  no discontinuance  or non-use of the trade mark by the respondent  to establish  the special  circumstances  in this case.  It is also not necessary to go into the question whether the application filed by the appellant under Section 48(1) and  its pendency  would be  a special circumstance in favour of  the respondent.  Suffice it  to  hold  that  sub- section (3)  of Section  46 is not attracted to the facts in this case.      The question  then is:  whether the discretion has been properly exercised  by both  the Division  Bench as well the single Judge in refusing to take off the trade mark from the register by striking off trade mark from the register of the



Registrar of Trade Marks?      It is  true that while exercising discretion, the Court under Section  46 of  the Act should take into consideration not only  commercial interest of the parties but also public interest: In  para 21.82  at page  386 of  the law  of Trade Marks and  passing-off by  P. Narayanan  (4th  Ed.),  it  is stated that  the Court  or the  Registrar has  discretion in granting  or  refusing  an  application  for  rectification. Ordinarily, however,  the mark  will be expunged (taken off) when the factual circumstances necessary for the removal are established unless  it is  shown that  the case comes within the exceptions  provided in  the sub-section  (3). The  High Court refused  to exercise  the discretion to strike off the trade mark  from the register. It is seen that the appellant had not  abandoned, at  any point  of time,  the use  of the trade mark  of  the  respondent-registered  proprietor  till filing of the application. Though the appellant has not used the trade  mark by itself since 1954 and after the expiry of the permitted use by Sen Raleigh until the notice was issued by the  respondent directing  the appellant  not to  use the trade mark,  the appellant  came to  use the same in passing off bicycles  manufactured by  it under  trade mark  of  the respondent. It  is not  relevant for  the purpose of Section 46(1)(b) whether  the bicycles  were manufactured  with  the assistance of technical know-how passed on by Sen Raleigh or the permitted  user. Suffice it to state that the appellant, as a  fact, had  used the  trade mark  of the  respondent in passing off the bicycles manufactured by it. The High Court, in our  view, declined,  for good  reasons, to  rectify  the trade mark  under Section Act b) of the Act. We are also not persuaded to  take a  different view  from that  of the High Court. In  these circumstances,  we are of the view that the High Court has properly exercised its discretion and refused to rectify  and strike off the trade mark, from the register of trade marks of the Registrar.      The  appeal   is  accordingly  dismissed  but,  in  the circumstances, without costs.