In the case of M/S Hero Ecotech Ltd. & Anr vs Hero Cycles Ltd. & Others on 7 July 2015:
In 2010, the families of four Munjal brothers — founder of Hero Cycles, namely, Brijmohan Lall, Om Prakash, Satyanand, and Dayanand (all of them deceased) separated amicably. All this while, there had never been any major disputation between the future generations of the four founders except for the issue of the use of ‘Hero’ brand as a prefix in Vijay Munjal’s Hero Ecotech Ltd, which also is in a business of bicycle manufacturing like Pankaj Munjal-led Hero Cycles Ltd.
The present case relates to the violation of the agreement and deceptive use of trade mark. For this case, it has to be understood that the respondents and defendants are close agnates and they shifted to India from Pakistan, wherein got engaged in the manufacturing of bicycle but after some time, they came to be recognized as an established empire in the business world of manufacturing bicycle and motorcycle, later on, they have also diversified their business in different areas. Their business empire ideally branches out into four major branches. Four branches constitute four groups of families. Each branch has a specified set of groups and services that they are supposed to cater to designated as F-1, F-2, F-3, and F-4. There were two agreements between these 4 parties, one in 2010 and the other one in 2011. The dispute is in between Vijay Kumar Munjal, F-1 family, and Om Prakash Munjal, F-4 family. For a better understanding of the issue, their business and manufacturing were grouped in four classified areas mentioned in clause 1.1.6 and 1.1.7 of the 2010 agreement. F-1 family has assigned trading business for export and import of two-wheeler electric vehicle & parts thereof bicycle parts. It is relevant to quote clauses 1.1.6 and 1.1.7 of the 2010 agreement which is as follows:
“1.1.6 “F-1 Family Group Product and Services” means:
a) existing trading business for exports;
b) import in India of two-wheeler electric vehicles and parts thereof and bicycle parts;
c) electric/environment-friendly vehicles (i.e. nonfuel land vehicles) and their components, and their related infrastructure;
d) projects, plants, and equipment components in the field of Solar Energy, Wind Energy, and other Renewable Energy, and
e) Medical Products and Lifestyle Care equipment for Hospitals, Rehabilitation, and Homes.
1.1.7 “F-1 Family Group Trade Marks” means,
a) the trademark HERO EXPORTS, registered or unregistered owned and/or used upon or concerning or in connection with the trading business of M/s Hero Exports for Exports relating to the sale, marketing of its trading items other than those items covered in clause 1.1.7 (d) below, and import in India of two-wheeler electric vehicles and parts thereof and bicycle parts.
b) the trademark HERO ELECTRIC registered or unregistered owned and/or used upon or concerning or in connection with the electric/environment-friendly vehicles (i.e. non-fuel land vehicles) and components and related infrastructure;
c) the trademark ERO Eco registered or unregistered, owned and/or used upon or concerning or in connection with the business relating to project s, plants, and equipment, components in the field of Solar Energy Wind Energy and other Renewable Energy and Medical Products and lifestyle care equipment for Hospitals, Rehabilitation and Homes and
d) the trademark HERO registered or unregistered and used for export of Bicycle and Bicycle parts by F-1 Family Group for all territories, other than the USA, Russia, Australia, New Zealand, Japan, and European Union (except U.K., Germany, and Turkey) which exclusively are retained by F-4 Family Group.”
Sub-clause (c ) and (d) of Clause 1.1.7 are very important for deciding the issue of interim injunction as the respondents have laid the claim “Hero Echotech Ltd” could have engaged itself in the project, plant, and equipment components in the field of solar energy, wind energy and other Renewal energy, medical products, and Lifestyle Care equipment for hospitals, rehabilitation, and home but sub-clause (d) provides that F- 1 family has been prohibited to use the HERO trademark inside India but for export of bicycle and parts thereof except USA Russia, Australia, New Zealand, Japan, and European Union except for U.K., Germany, and Turkey) which exclusively are retained by F-4 Family Group has been authorized. Clause 2 (1) provides that F-4 Family Group has the exclusive right of ownership and use.
To understand the real controversy of the two families, it will be relevant to quote Clause 2(viii) of the agreement which is as follows:
“2(viii) For avoidance of doubt, each party hereby agree that
the only restriction on use of trademark and name will be for the products and services with the same name, monogram and trademark. For purposes of illustration, only F-4 Family Group shall be entitled to engage in Bicycle/Automotive Products and Services with the trademark and name HERO and the other three Family Group may engage in the business of Bicycle/Automotive Products and Services without using the trademark and name HERO, with or without prefix or suffixes. It is further agreed that the F-1 Family Group and F-3 Family Group will use different monograms than the monogram being currently used by M/s Hero Cycles Limited, a company owned by the F-4 Family Group.”
On scrutiny of Clause 2(viii), the Court had to decide on the question of “area of prohibition” and “area of permission”. It is specifically stated that the area of prohibition and restriction that has been provided is the use of the name, trademark, and monogram of other family groups on the product and service with the same name, monogram, and trademark and by way of illustration, it has been provided that F-4 Family Group shall be entitled to engage in Bicycle/Automotive products and services with the trademark and name HERO and its monogram.
So it denotes F-4 Family Group, the trademark “HERO” related to the bicycle, cannot be used by other family groups engaged in manufacturing of bicycle. Clause 2(viii) also provides that other three family groups may engage in the business of bicycle and automotive products and services without using the trademark and name HERO, without prefix and suffix. From the recital, it is clear that other family members have been allowed to engage in the manufacturing of cycle and cycle parts but the prohibition is that they cannot use trademark and trade name HERO either in prefix or suffix. There is no prohibition for the production of cycles by the F-1 Family Group but the prohibition is only that no Family Group will use the trademark and trade name HERO nor its monogram.
To understand the controversy, it is to see the nature of the complaint made by the respondents in the plaint. In Para-17 of the plaint, the issue has been raised that the defendants are using the trade name Hero Ecotech Ltd concerning and in connection with bicycle and bicycle products. Hero Ecotech Ltd, as interpreted by this Court, is not the trade name but it is the name of the Company. Para 17(ii) of the petition, the issue has been raised that defendant no.3 has launched a new range of bicycles in India under the brand name “KROSS” and defendants are also widely advertising the same on their websites http://www.heroelectric.in and http://www.krossbikes.in. In Para 17(iii) it has been mentioned that defendant no.3 has created the website http://www.krossbikes.in on 3rd October 2012 through which they are marketing and promoting their bicycles under the brand name “KROSS” in India. Perusal of the website http://www.krissbikes.in reveals that Hero Eco group is marketing and promoting the business with the brand name “KROSS” in India. In Para-18 it has been mentioned that defendants follow the practice of incorporating their trade name Hero Ecotech Ltd on the bicycles. Unauthorized manufacture by them contrary to the agreed terms and conditions of the Terms of the Agreement. Further use of the trade name HERO ECOTECH LIMITED on the packaging of the unauthorizedly manufactured bicycles also amounts to use as a part of the trade dress which is contrary to the terms of the agreement.
In Para-19 it has been claimed that trademark HERO in respect of bicycles and bicycles parts, falling under Class- 12 of the International Classification of goods and services, and has several registrations subsisting before the Trade Marks Registry. A complaint has been made that they have been wrongly using HERO on their package of bicycles. In Para-20 they have made raised an issue that the defendants are launching their bicycle range in India under the trade name HERO Ecotech Ltd.
To understand the dispute better, Para-20(iii) of the petition is relevant where a specific complaint has been made that several persons of public, customers, dealers as well as local bicycle traders, have been misguided, fallen prey to the misrepresentation of facts and purchased defendant’s bicycles under the brand KROSS. So from the plaint, it appears that the respondents suggested that F-1 Family, are using the word KROSS as well as Hero Ecotech Ltd projecting themselves as being associated or having a connection with respondents.
A counsel from the appellants side submitted before the Court that before passing the interim order, the opposite party were using HERO KROSS in the bicycle but after the injunction, they are not using the same but the counsels appearing for the respondents submitted before the court that F-1 defendant Company has been using, printing in the cycle as well as in the package the word ‘manufactured by HERO ECOTECH’. F-1 Family was using the trade name KROSS. The trademark and trade name which is printed on the bicycle of both the defendant and respondent company are different whereas the Use of the word Hero on the bicycle conveys the impression that the bicycles are from the same enterprise. So the Court opined that the trademark and trade name of both the families are quite different and distinct having no resemblance from any corner creating deception in the mind of the purchaser. Prohibition is that the F-4 Family cannot use the word HERO with the word “KROSS” either as prefix or as suffix. Kross is not the prohibited area but the prohibited area is HERO cannot be used either in prefix or suffix.
The lower court had granted an injunction and thereafter refused to vacate the same, committed an error of record as in Para-5 in the impugned order, the cause of refusing to vacate the injunction is the use of HERO KROSS in the bicycle as a matter of record as accepted by the counsel for the respondents that only “Kross” is being printed in the cycle and so much so also printed “Manufactured by Ecotech Ltd.”. In the application for vacating the order of injunction, the defendants had taken a plea that the respondents obtained the interim injunction by suppressing the material facts, as was claimed that after the 2010 agreement, F-1 Family and F-4 Family entered into another agreement as a realignment agreement 2011 and realignment agreement modifies certain clauses (to be specific- the Arbitration clause). Counsel for the defendants could not point out that by the 2011 agreement any clause of the 2010 agreement has in any way been modified or deleted or in any manner truncated. So the claim of the defendants that by suppression of material fact the order of interim injunction was obtained stands sans proof but the ground to refuse to vacate the injunction, as stated by the trial court has are as follows:
“The defendants have admitted that they were making bicycle with the trademark KROSS prefix of HERO in their petition filed under Order XXXIX Rule 4 CPC. There they are violating the terms of agreement” which is an error of record so much so the admission of the counsel for the respondents makes the matter clear that appellants are using any printing in bicycle KROSS” as well printing Hero Ecotech Ltd.
The Defendants have been using the ‘Manufactured by Ecotech Ltd’ in the body of the bicycle as well as on the package. Now the question would arise whether F-4 Family can be prohibited to print the name of the company in the product and its package. What has been prohibited in the agreement, the parties will not use the name HERO in prefix and suffix in the trademark with respect to the manufacturing of bicycles which has been assigned to F-4 Family. The agreement does not show that F-I Family cannot use the name of its Company as the bicycles are manufactured by HERO ECOTECH LTD which is the name of the Company. Counsel for the appellants pointed out that Respondents through Authorized Signatory of Hero Cycle Ltd. addressed to Mr. Ashoka Goyal, Hero Electric Ltd., Ludhiana, in the said reply it has been specifically stated indicating the name of the manufacturer on the product is not “trademark” usage. The Trademark, trade name, and monogram of the appellant are quite different and distinct cannot be said it creates any deception and confusion in any manner to a purchaser but it is made clear, the appellant cannot use Hero in prefix or suffix with trademark name KROSS.
Given the aforesaid discussion, the Court held that Respondents have failed to satisfy all three ingredients, namely i.) prima facie case, ii.) balance of convenience and iii.) irreparable loss, for granting an injunction. This Court is of the view that the lower court has not properly and with sound reason exercised power in granting the injunction as well as refusing to vacate the order of injunction and, accordingly, the order dated 21/3/2015 is set aside and the injunction is vacated. This Court in the present case is not examining other issues, such as territorial jurisdiction, as well as the jurisdiction of Arbitration Tribunal under the Arbitration Act, 1996 though the parties have raised the points during an argument. This Court is also not deciding the maintainability of the suit on the ground of artificial cause of action with the sole purpose of creating the cause of action within the territorial jurisdiction of the civil court.
CONCLUSION
On the whole, a detailed study of the case will help one in understanding the lacuna in the present scenario. In my opinion, there are certain shortcomings concerning the law-firstly, the question of maintainability arises as there might be an issue with the territorial jurisdiction. Secondly, it is a well-established principle of law that in case the jurisdiction about a dispute lies with two courts it is upon the parties to choose upon one. Wherein, in circumstances where the election of a particular dispute redressal authority has been opted for, the rests of the courts lose its jurisdiction. In this case, an arbitration agreement already exists concerning the 2011 realignment, hence the dispute ceases to be tried by any other court/authority. Recently, when the parties appealed to the Delhi High Court, the Court ordered dispute settlement through Arbitration.
ANALYSISI REPORT BY: SOHINI GOSWAMI, AMITY LAW SCHOOL, AMITY UNIVERSITY, KOLKATA
DUCTUS EDGE 